The society advertised returns that customers had 'close to zero' chance of
receiving

One of Britain’s biggest building societies has been fined more than £1m for exaggerating the returns that investors could expect from stock-market-linked bonds.

Yorkshire Building Society will pay £1.4m to the City regulator, the Financial Conduct Authority (FCA), for heavily promoting the maximum gain that the bonds could produce when the chances of the maximum figure being achieved were “close to 0pc”.

The bonds concerned, called Cliquet Guaranteed Capital Accounts, Guaranteed Investment Accounts and Protected Capital Accounts, are so-called “structured products” which combine a deposit account with some exposure to the stock market. They were typically sold to “unsophisticated investors with limited investment experience and knowledge”, the regulator said.

It said the Cliquet products “were designed to provide capital protection and a guaranteed minimum return with the apparent potential for significantly more if the FTSE 100 performed consistently well”. But it added: “The probability of achieving only the minimum return was 40pc-50pc and the probability of achieving the maximum return was close to 0pc.

Almost 84,000 customers invested a total of about £800m, with about 75pc of that total accounted for by Yorkshire. The mutual’s customers will be offered the choice of cashing in the products with interest or holding until maturity. Yorkshire said it would be communicating further information to affected customers, including those who have closed their account, over the coming weeks.

Yorkshire also sold the plans through its Chelsea and Barnsley brands.

The products were designed by Credit Suisse and the Swiss bank was fined £2.4m for claims in its marketing materials about the products’ likely gains. The same products were also sold by five other building societies, Principality, Saffron, Leeds, Cambridge and Stroud & Swindon, a spokesman for the FCA said, as well as two chains of financial advisers, Co-op Financial Advisers and Beacon Nationwide Agencies. The spokesman said these organisations would also have used Credit Suisse's misleading marketing materials and that their customers were being contacted, but he could not comment on the possibility of them being fined.

Tracey McDermott, the FCA’s director of enforcement and financial crime said: “It is crucial that firms consider the needs of their customers from the time that products are being designed through to their marketing and sale. The information provided to customers forms an important part of this. Financial promotions are often the primary source of information for consumers and in this case Credit Suisse and Yorkshire let their customers down badly.

“These promotions were a serious breach of the requirement to be clear, fair and not misleading. Credit Suisse and Yorkshire knew that the chances of receiving the maximum return were close to zero but they nevertheless highlighted this as a key promotional feature of the product. This was unacceptable.”

Yorkshire apologised to its customers and said it “fully accepts” the FCA’s decision. “On this occasion we have fallen short of our own high standards, and of putting our customers at the heart of everything we do,” it added.

Credit Suisse has a dedicated helpline for the products on 0800 052 0044.